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IPFS News Link • Ron Paul Says...

Will BRICS Smash the Dollar?

• Ron Paul Institute - Ron Paul

This was the decision of the BRICS (Brazil, Russia, India, China, and South Africa), who formed their alliance to challenge US political and economic dominance, to induct six new countries into their group: Argentina, Egypt, Ethiopia, Iran, Saudi Arabia, and the United Arab Emirates.   

One way the BRICS hope to achieve its goals is to undermine the foundation of US power: the dollar's global reserve currency status. Brazilian President Luiz Inacio Lula de Silva called for BRICS nations to create their own currency, while India is pushing to have its trading partners, including Russia, trade in Indian rupees rather than US dollars. China and other BRICS countries have also reportedly taken steps to explore using gold instead of dollars for international trade.

After then-President Richard Nixon severed the link between the dollar and gold in 1971, Henry Kissinger negotiated a deal with Saudi Arabia where, in exchange for US diplomatic and military support, Saudi Arabia would use dollars for its dealings in the international oil market. The "petrodollar" is the backbone of the dollar's reserve currency status. Early this year, Saudi Arabia signed a deal with Brazil to accept Brazil's currency instead of dollars for oil purchases. If Saudi Arabia signs similar deals with other BRICS nations it will hasten the end of the dollar's reign as reserve currency. 

The rejection of the dollar is also being driven in large part by resentment over the "weaponization" of the dollar's reserve currency status. The US government uses the dollar's reserve currency position in order to force other countries to comply with US sanctions against the latest "designated Hitler." Sanctions are an act of war, so by forcing other countries to follow US sanctions the US Government is dragging them into conflicts that are not in their national interests. It was inevitable that the arrogance of our foreign policy elite would eventually cause a backlash. The backlash started last year when the US demanded other countries join in sanctioning Russia, regardless of the effects of those sanctions on their own economies.